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What Are the Differences Between A/R Reports In a Multicurrency Environment?

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In QuickBooks 2009 there are 6 reports to provide information about what customers or clients owe to a firm.  They are:

  1. A/R Aging Summary
  2. A/R Aging Detail
  3. Customer Balance Summary
  4. Customer Balance Detail
  5. Open Invoices
  6. Collections Report

These reports are found on the Reports->Customers & Receivables menu selection.  Each report is intended to provide certain information, and in a multicurrency environment the information reported may appear to contradict information on financial statements, such as a firm’s balance sheet.  The contradiction is only apparent, because by design some of these reports do not include transactions that are included in balance sheet accounts, such as General Journal entries from home currency adjustments.

In the example reports that follow, the company’s balance sheet shows a balance for Accounts Receivable – EUR (the A/R account for the 1 customer reported) of $17,500.  This balance consists of a $15,000 invoice and a $2,500 exchange gain recorded as a home currency adjustment.  Home currency adjustments are recorded as General Journal entries.  For simplicity, we’ve filtered these reports to show a single customer.  When comparing the totals on these reports to amounts reported on a balance sheet, it’s important that filter settings for the report match the balance sheet date and include all relevant transactions for a balance sheet A/R account.  However, even when filters are set appropriately, the totals on these reports may not match the balance sheet because of filters that are embedded in the reports themselves that restrict the types of customer transactions reported.  These embedded filters are part of the report design and can’t be changed.

The A/R Aging Summary and A/R Aging Detail reports show unpaid invoices and statement charges by billing period but do not include General Journal entries.  Therefore, these reports do not match the amount reported on the balance sheet.

QuickBooks Premier 2009 Multicurrency A/R Aging Summary
QuickBooks Premier 2009 Multicurrency A/R Aging Detail

The Customer Balance Summary and Customer Balance Detail reports show all transactions related to customers.  The detail report is grouped by customer and job, where the Amount column is the original transaction amount and the Balance column is the open or unpaid amount.  Because these reports show all customer transactions, they will include currency adjustments posted to a customer’s account as General Journal entries.  Therefore, the total shown on these reports does match the balance sheet.

QuickBooks Premier 2009 Multicurrency Customer Balance Detail Summary Report
QuickBooks Premier 2009 Multicurrency Customer Balance Detail Report

The Open Invoices report lists unpaid invoices and statement charges, grouped and subtotaled by customer and job, but it does not include General Journal entries from currency adjustments.  Therefore, the total shown on this report does not match the balance sheet.

QuickBooks Premier 2009 Multicurrency Open Invoices Report

The Collections Report lists overdue invoices and statement charges grouped by customer and job, along with the customer’s contact name and phone number.  Because this report only includes invoices and statement charges, it will not include currency adjustments posted to the customer’s account as General Journal entries.  Therefore, the total shown on this report does not match the balance sheet.

QuickBooks Premier 2009 Multicurrency Collections Report

If your goal is to produce detail or summary reports to substantiate the amounts reported on a firm’s balance sheet, either the Customer Balance Summary or Customer Balance Detail report is the best choice, because it includes all transactions and doesn’t exclude General Journal entries.  In a multicurrency environment, where General Journal entries are common, other reports may appear to contradict the balance sheet amounts because they do not include these General Journal entries.

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Are There Restrictions On Making General Journal Entries To A/R and A/P Accounts?

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Yes, there are a few restrictions on making General Journal Entries to Accounts Receivable (A/R) and Accounts Payable (A/P) accounts.

Normally, the preferred way to change the balance in an A/R or A/P account is by recording transactions, such as customer invoices or vendor bills. However, sometimes it’s more convenient to make a General Journal Entry.  A common use of General Journal Entries to A/R or A/P accounts is to set up customer or vendor balances in a new QuickBooks company file.

If you opt to make a General Journal Entry to an A/R or A/P account, such entries are subject to these restrictions:

  1. You can’t use more than 1 A/R or A/P account in a single journal entry
  2. You must enter a customer name for a General Journal Entry to an A/R account and a vendor name for a entry to a A/P account

Here are some of the warnings you’ll see if you attempt to violate these restrictions:

QuickBooks Premier 2009 General Ledger Warning 1
QuickBooks Premier 2009 General Ledger Warning 2
QuickBooks Premier 2009 General Ledger Warning 3

Here’s an example of a General Journal Entry to 1 A/P account that meets the restrictions:

QuickBooks Premier 2009 GL Make General Journal Entries Accounts Payable

While not an absolute requirement, QuickBooks prefers that transactions involving A/R or A/P accounts have that account on the first line of the General Journal Entry.  The first line of a General Journal Entry is the source of the transaction.  Sources and targets are an important concept in QuickBooks.  For more information, see our article on sources and targets.

When you record a General Journal Entry to an A/R or A/P account, the General Journal Entry will appear in the transaction list for the customer or vendor specified in either the Customer Center or Vendor Center – provided that the A/R or A/P account is on the first line of the general journal entry and is therefore the transaction source.  General Journal Entries that debit (increase) A/R will be similar to a customer invoice and can be paid in a similar fashion.  General Journal Entries that credit (increase) A/P will be similar to a vendor bill and likewise can be paid just like other vendor bills.  However, some data fields are not filled in when recording transactions for a customer or vendor via a General Journal Entry.  For example, the Terms and Due Date fields on a General Journal Entry for a vendor are left blank, as shown below. (Note: The single screenshot below shows a customized Vendor Center with the separate Pay Bills window placed on top of it to illustrate several of the points discussed in this article.)

QuickBooks Premier 2009 Vendor Center Plus Pay Bills

Beyond restrictions on making General Journal Entries to an A/R or A/P account, there are other restrictions that apply to making General Journal Entries, such as currency restrictions in multicurrency environments.

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What Are Sources and Targets?

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Sources and targets are important concepts to understand reporting in QuickBooks and use of the Advanced Find function.

Sources and targets are terms assigned by Intuit to describe transactions.

In most instances, the source of a transaction is the summary or total of the transaction.  For example, the source of a check includes the amount of the check, the payee, and the bank account from which the check was written.  The target of a transaction is the distribution of the source into 1 or more other accounts.  For example, a check might be used to pay expenses in 2 different General Ledger accounts, which appear on the Expenses tab below the check payee information.  The targets of this check include the information on these 2 lines.

A transaction can have 1 source and 1 or more targets.  In most instances, the source is equal to the sum of the targets.  Forms or windows in QuickBooks determine what information will be the source and what will be the target.  Your only control over what is the source or target is what you enter (subject to validation) in the appropriate area of the form.  In the check example below, the top part of the check form is always the source, and the bottom part always contains the target information.  However, don’t extend too far the thought that the “sources are on top of the form and targets on the bottom.”  That only applies to A/R & A/P transactions.

General Journal Entries are one important exception to the discussion of sources and targets.  The first line of a general Journal Entry is the source, and all other lines are targets.  Depending on how one enters a general journal entry, the source may not be equal to the sum of the targets.  Since you have direct control over the order of lines in a general journal entry, you do control what the source and targets are for general journal entries.

Payments, statement charges, and transfers don’t follow the model that the source is on the top of the form and targets on the bottom.

Here are the source and targets for QuickBooks transaction types:

  • Invoice: A/R is the source; income accounts associated with the line items are the targets
  • Bill: A/P is the source; expense accounts on the line items are the targets
  • Deposit: The Deposit To account is the source; the accounts on the line items are the targets
  • Payment: The Deposit To account is the source; A/R is the target

To learn the source and targets for any transaction, click the Journal button or use the keyboard shortcut Ctrl + Y.  The source is the first line listed.  The targets are the lines listed after the source.

QuickBooks Enterprise Solutions 10 Check
QuickBooks Enterprise Solutions 10 Check Transaction Journal

In this example, the source is the first line of the report that shows the payee and check amount.  There is 1 target, the second line that contains the distribution information.  We’ve added Source Name as an additional column to the standard Transaction Journal report to better illustrate sources and targets. Note that the Name field for the target is the Customer:Job name, but the Source Name is the check payee.  Reports that show target information won’t show the check payee in the Name field.

That leads to confusion among QuickBooks users that aren’t familiar with sources, targets, and the type of information that appears on a report.  A report that shows check information in an expense account is reporting target information.  The report is not indicating that a check was written to the information shown in the Name field.

According to Intuit:

  • sources and targets are database concepts and have nothing to do with debits or credits
  • a source can be a debit or credit, just as a target can be a debit or credit
  • most reports display a mixture of source and target data
  • the Inventory Valuation Summary and Inventory Valuation Detail reports are examples of exceptions in that they display only target data

This Intuit knowledge base article offers additional information on sources and targets.  When reading it, don’t forget the general journal entry exception to statements about sources and targets.  Some of the statements in Intuit’s own materials don’t repeat that exception, and they’re only true with that exception noted.

Issues involving confusion about sources and targets are fairly common.  To address these issues, Intuit also offers explanations of the source and target data sets, the report set, where reports get their data, and how conflicting report filters produce unexpected results.

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How Can I Use Reports To Assist Rebuilding a Damaged Company File?

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QuickBooks reports can be a valuable complement to the process of rebuilding a damaged company file (.qbw).  After running the Rebuild Data utility, Intuit recommends that you proceed through these steps in the order listed to identify data damage that the rebuilding process repaired and to confirm that further data problems don’t exist.

1.  Examine the Uncategorized Expenses account for damaged transactions.  During the rebuild process, QuickBooks may put some transactions into this account as a way of restoring balance to your financial records.  Under normal circumstances, the only transactions that should be in this account are voided checks.  Look for transactions that don’t have an amount or account associated with them.  You’ll need to delete these transactions and re-enter them with the correct amount and account.  The Uncategorized Expenses account is created automatically by QuickBooks.  If you’ve never produced an event that would have automatically created this account, you won’t see it in your chart of accounts.  The simplest way to examine the Uncategorized Expenses account is to open the Chart of Accounts window by clicking on the Company->Chart of Accounts menu selection (or use the keyboard shortcut Ctrl + a).  Locate the Uncategorized Expenses account (if it exists) and double-click on it to produce a QuickReport.  Change the Dates filter to All to include all entries in the account.  The transactions reported (other than voided checks) will require attention.

Here’s a screenshot of the Uncategorized Expenses account in the Chart of Accounts list.

QuickBooks Premier 2009 GL Uncategorized Expenses

2.  Examine the Uncategorized Income account for damaged transactions.  Just like the behavior of the Uncategorized Expeses account, QuickBooks may put some transactions into this account during the rebuild process as a way of restoring balance to your financial records.  Review this account for transactions that are missing amounts or for transactions that are linked to the wrong account.  You’ll need to delete these transactions and re-enter them with the correct amount and account.

Here’s a screenshot of the Uncategorized Income account in the Chart of Accounts list.

QuickBooks Premier 2009 GL Uncategorized Income

3.  Verify that total debits less total credits equals the balance in the Undeposited Funds account.  To do this, run a Custom Transaction Detail Report (Reports->Custom Transaction Detail Report).  Be sure to include All dates from the Dates pull-down menu; click the Modify Report… button and choose the Filters tab.  On the Account pull-down menu, choose only the Undeposited Funds account.

4.  Compare the total in the Open Invoices report (Reports->Customer & Receivables->Open Invoices) to the A/R balance shown on a Balance Sheet (Reports->Company & Financial->Balance Sheet Summary) and make sure they match.  Make sure that the Dates filter for the Open Invoices report is set to Today and that your balance sheet Dates filter is set to All.  If your balance sheet filter is not set to All and you have entered customer payments after the balance sheet date, you’ll see a difference between the amounts on these 2 reports.  That difference doesn’t indicate a data problem. You can also check the current A/R balance in the Chart of Accounts window (Company->Chart of Accounts).

Here’s a screenshot of the 2 reports side by side where the A/R balances shown on the reports match perfectly.

Report Rebuild Compare Open Invoices To Balance Sheet

5.  Compare the total in the Unpaid Bills Detail report (Reports->Vendors & Payables->Unpaid Bills Detail) to the A/P Balance shown on a Balance Sheet (Reports->Company & Financial->Balance Sheet Summary) and make sure they match.  Make sure that the Dates filter for the Unpaid Bills Detail report is set to Today and that your balance sheet Dates filter is set to All.  If your balance sheet filter is not set to All and you have paid bills after the balance sheet date, you’ll see a difference between the amounts on these 2 reports.  That difference doesn’t indicate a data problem.  You can also check the current A/P balance in the Chart of Accounts window (Company->Chart of Accounts).

Here’s a screenshot of the 2 reports side by side where the A/P balances shown on the reports match perfectly.

Report Rebuild Compare Unpaid Bills To Balance Sheet

6.  Verify that ASSETS = LIABILITIES + EQUITY on both an accrual and cash basis balance sheet.   Produce a Balance Sheet Detail report (Reports->Company & Financial->Balance Sheet Detail) and confirm that Total Assets = Total Liabilities + Equity.  Note that Total Liabilities itself is the sum of Total Current Liabilities and Non-current Liabilities.  The balance sheet example shown below doesn’t include any Non-current Liabilities, and to reduce image size we’ve reproduced a Balance Sheet Summary report, rather than a detail report.

Here’s a screenshot of a Summary Balance Sheet where accounts are in balance:

Report Summary Balance Sheet

You need to verify that both accrual and cash basis balance sheets are in balance.  To change the report basis, click the Modify Report… button.  On the Display tab, select either Accrual or Cash as your Report Basis.

QuickBooks Premier 2009 Modify Report Basis

If either or both of these reports are out of balance, there are further troubleshooting steps to follow depending on which report (either the cash or accrual basis report) is out of balance.

See our related articles for more information on troubleshooting out-of-balance accrual basis balance sheets and rebuilding a company file.

For more information using the reporting function in QuickBooks to assist rebuilding a damaged company file, consult this Intuit knowledge base article.

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